Decree No. 132/2020/NĐ-CP: Contractual terms of related-party transactions in Vietnam

According to the Decree No. 132/2020/NĐ-CP of Vietnam’s Government, contractual terms of transactions include certain terms regarding volumes and conditions of the transaction or product distribution; duration, conditions and methods of payment; terms and conditions of warranty, replacement, improvement, update, correction or adjustment of product; terms and conditions of exclusive rights to trade and distribute products; certain other terms and conditions having economic effects such as support and advisory services for quality control, user’s instruction, advertising and promotional activities.

- In cases where terms and conditions of a legally binding agreement, credential or written agreement do not adequately reflect the reality of execution of such transactions between related parties, the comparability analysis shall be conducted on the basis of carrying out review of events occurring in the reality or financial data in order to identify economic characteristics, nature and risks associated with the practical reality of business of these parties;

- Unless related parties enter into a legally binding agreement, document or arrangement in order not to recognize sales or expenses derived from technical assistance, synergies in the multinational group, sharing of business know-how or utilization of seconded or dual-contract staff, the comparability analysis is carried out to determine the nature, value of transaction, income generated from these transactions and contribution made by each related party. This is used as the basis for comparison with business decisions that may be accepted by independent parties under the same or similar conditions.

View more details at the Decree No. 132/2020/NĐ-CP of Vietnam’s Government, effective from December 20, 2020.

Thuy Tram

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